RBI Amends Guidelines on Financial Services Provided by Banks
RBI has amended its Master Direction (or guidelines) on financial services provided by banks, which it originally issued in May 2016. The provisions of these Directions shall apply to every Scheduled Commercial Bank (excluding a Regional Rural Bank or RRB), licensed to operate in India by RBI. Unless otherwise specified, these directions shall not be applicable to overseas branches and subsidiaries of these banks.
RBI decided to make certain amendments after considering the suggestions and queries received from SEBI, banks, and other stakeholders. The amendment states, among others, that no bank shall:
- Hold more than 10% in the equity of a deposit-taking non-banking finance company or NBFC, provided that this does not apply to a housing finance company
- Make an investment of more than 10% of the unit capital of a Real Estate Investment Trust/Infrastructure Investment Trust subject to overall ceiling of 20% of its net worth permitted for direct investments in shares, convertible bonds/debentures, units of equity-oriented mutual funds and exposures to Alternative Investment Funds (AIFs)
- Hold along with its subsidiaries, associates or joint ventures or entities directly or indirectly controlled by the bank; and mutual funds managed by Asset Management Companies controlled by the bank, more than 20% of the investee company’s paid up share capital engaged in non-financial services
- Make any investment in a Category III AIF. Investment by a bank’s subsidiary in a Category III AIF shall be restricted to the regulatory minima prescribed by SEBI
Furthermore, the amendment states that banks shall ascertain the risks arising on account of equity investments in Alternative Investment Funds done directly or through their subsidiaries, within the Internal Capital Adequacy Assessment Process (ICAAP) framework and determine the additional capital required, which will be subject to supervisory examination as part of Supervisory Review and Evaluation Process. This shall also be applicable to sponsoring of Infrastructure Debt Funds by banks. Additionally, Section 14(a)(ii) is being amended to read as under: “It [bank] has the minimum prescribed capital (including Capital Conservation Buffer) after investment.”
Keywords: Asia Pacific, India, Banking, NBFC, AIF, ICAAP, RBI
Previous Article
FPC Recommends Setting Minimum Leverage Requirement at 3.25%Related Insights
News
OFR Adopts Data Collection Rule on Centrally Cleared Repo TransactionsOFR adopted a final rule to establish a data collection covering centrally cleared funding transactions in the U.S. repurchase agreement (repo) market.
February 20, 2019
WebPage
Regulatory News
|
News
FHFA Finalizes Rule on Federal Home Loan Bank Capital RequirementsFHFA published, in Federal Register, the final rule to adopt, as its own, portions of the regulations of the Federal Housing Finance Board pertaining to the capital requirements for the Federal Home Loan Banks.
February 20, 2019
WebPage
Regulatory News
|
News
SRB Publishes Framework for Performing Valuations in ResolutionThe framework provides independent valuers and the general public with an indication of the expectations of SRB on the principles and methodologies for valuation reports, as set out in the legal framework.
February 19, 2019
WebPage
Regulatory News
|
News
US Agencies Extend Consultation Period for the Proposed SA-CCRUS Agencies (FDIC, FED, and OCC) extended the comment period for a proposed rule to update their standards for how firms measure counterparty credit risk posed by derivative contracts.
February 18, 2019
WebPage
Regulatory News
|
News
FED Extends Consultation Period for Stress Testing RuleFED has published in the Federal Register a notice proposing amendments to the company run and supervisory stress test rules.
February 15, 2019
WebPage
Regulatory News
|
News
EBA Single Rulebook Q&A: Third Update for February 2019EBA published answers to two questions under the Single Rulebook question and answer (Q&A) updates for this week.
February 15, 2019
WebPage
Regulatory News
|
News
SEC Proposes Rule on Risk Mitigation Techniques for Uncleared SBSSEC proposed a rule that would require the application of specific risk-mitigation techniques to portfolios of security-based swaps (SBS) that are not submitted for clearing.
February 15, 2019
WebPage
Regulatory News
|
News
FSB Report Examines Financial Stability Implications of FintechFSB published a report that assesses fintech-related market developments and their potential implications for financial stability.
February 14, 2019
WebPage
Regulatory News
|
News
US Agencies Amend Regulatory Capital Rule to Allow Phase-In for CECLUS Agencies (FDIC, FED, and OCC) adopted the final rule to address changes to credit loss accounting under the U.S. generally accepted accounting principles; this includes banking organizations’ implementation of the current expected credit losses (CECL) methodology.
February 14, 2019
WebPage
Regulatory News
|
News
FASB Proposes Taxonomy Improvements for the Credit Losses StandardFASB proposed the taxonomy improvements for the proposed Accounting Standards Updates on Targeted Transition Relief for Topic 326 (Financial Instruments—Credit Losses) and Topic 805 (on Business Combinations—Revenue from Contracts with Customers).
February 14, 2019
WebPage
Regulatory News
|